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Debenhams secures £40m cash lifeline in fight for survival

Embattled department store chain Debenhams saw its shares jump 35 per cent this morning after it secured a £40m cash injection, as it fights to keep afloat amid crunch debt talks with lenders.

The retailer, which has issued three profit warnings in the last 12 months, said that the agreed £40m loan will "act as a bridge to facilitate a broader refinancing and recapitalisation".

Read more: Debenhams lending talks pay off as it closes in on rescue plan

Shares rose 36 per cent in early morning trading to 4.28p, though the stock has lost 95 per cent of its value since trading at a peak 95.8p in May 2015.

Debenhams, which said last month that it had net debt of roughly £286m, also revealed that it has secured additional time from its lenders amid its long-term refinancing efforts.

Sergio Bucher, the chief executive of Debenhams who was ousted from the board last month, said: "Today’s announcement represents the first step in our refinancing process. The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders, and deliver a sustainable and profitable future for Debenhams."

He added: "In addition, the partnership agreement we are announcing today with Li & Fung will be a key part of our turnaround plan. It gives us access to state-of-the-art technology in the LF Digital platform, providing end-to-end visibility across our supply chain. This will help us anticipate and respond more quickly to trends and our customers’ preferences, as well as delivering better quality product."

The news, first reported late last night by the Guardian, comes as the beleaguered high street retailer embarks on a controversial insolvency procedure known as a company voluntary arrangement (CVA), which could result in dozens of stores closing and thousands of jobs being cut.

Alasdair Ronald, senior investment manager at Brewin Dolphin, said: "The announcement of today’s cash injection from Debenhams’ lenders will be some much-needed positive news for shareholders in the struggling department store.

Read more: Debenhams may slash 10,000 jobs in rescue plan

"However, context is key and one has to remember that this comes only weeks after a very tough Christmas period for the company. Debenhams is approaching a crunch point: it’s trying to agree a company voluntary arrangement which will accelerate store closures and re-negotiate rents – both of which will be crucial to the business’s survival. Whatever happens, significant change is required if Debenhams is to secure its future."

In December the firm turned down a £40m interest-free loan from Sports Direct owner Mike Ashley, saying that the offer "came with conditions that could affect the interests of other stakeholders".